On 1 May 2009, I was appointed Chairman of MASB as a successor to Dato’ Zainal Abidin Putih, our Chairman for the last six years. During his tenure, Dato’ Zainal had made significant progress, advancement and contribution towards adopting and applying a high quality set of internationally recognised accounting standards.

MASB has come a long way from being an inconspicuous accounting standard setter to an active internationally respected body providing relevant input into the international standard setting process.

Some of the highlights of Dato’s contributions to MASB were:

1.The policy decision to adopt international standards issued by IASB into Malaysia in full by 2012.

2.The creation of an Islamic research unit to help support the Malaysia Government initiative to be an Islamic Finance Hub.

3.Helping to put Malaysia on the international standard setters network by promoting the Regional Standard Setters (RSS) initiative among ASEAN Standard Setters, the increased participation in standard setting feedback and most importantly, helping to spearhead the creation of AOSSG which was a significant step by emerging countries to have a larger voice in the standard setting world.

4.Successfully managing the progress of adoption of IFRS into Malaysia. On 30 April 2009, only four principal IFRS had yet to be adopted, namely IAS 39 & IFRS 7 on Financial Instruments, IAS 41 Agriculture and IFRS 4 Insurance Contracts.

I would personally add my note of thanks to Dato’ Zainal who, even after he stepped down, helped organised the very successful First AOSSG meeting in Kuala Lumpur in November 2009 which in addition to being historic, clearly showed the professionalism, commitment and quality of Malaysia in being able to hold an event of this size. We receive many accolades for this event and, I believe, it was largely due to the efforts of Dato’ Zainal as the chairman of the organising committee.

Current Imperatives

My current mandate is to follow in the footsteps of my predecessor. I would summarise the key areas into six:

1.Successfully adopting all IFRS standards and interpretations as MASB standards by 2012

2.Ensuring there is an acceptable accounting framework for SMEs

3.Facilitate the implementation of the new MASB standards

4. Engaging stakeholders of the Reporting Framework

5.Educating the preparers and users

6.Engaging regional and international standard setters

These six areas and our activities and initiatives are elaborated below.

Adoption of IFRS by 1 January 2012

The MASB had agreed in 2008 that we converge or fully adopt the IFRSs by 2012.

During the year under review, we have worked hard to bring about convergence of national accounting standards with international accounting standards, IFRS and are on track to achieve our target by 2012.

As at 31 December 2009, there were 19 IASB final documents at various stages of the MASB due process for adoption. These comprised 7 Standards, 7 Interpretations and 5 limited amendments to the existing FRS.

Of the 19 outstanding documents, 13 have been issued as MASB ED. We plan to expose the remaining 6 in the current year. By end 2010 we hope to reduce the remaining documents to 5 and to be fully converged by end 2011. However, this is dependant on the progress and introduction by IASB, of new accounting standards to address the Global Financial Crisis.

Mitigating effects of IFRS adoption on SMEs

Malaysia has a significant number of non-listed companies, many of which are SMEs. Malaysia had earlier pioneered a different framework for SME called PERS.

We are reviewing whether a change to the appropriate accounting framework is required for these companies given the recent developments at the IASB.

We plan to participate actively in field tests conducted by IASB, as we did in 2007, for IFRS for SMEs and to conduct joint roadshows with MIA to seek feedback from stakeholders around the country before making a final decision.

Facilitate implementation of accounting standards

This involves MASB working with MIA’s FRS Implementation Committee (MIA FRSIC) as well as MASB setting up its FRS 139 Implementation Committee (FRS 139 IC) and its Convergence Task Force (CTF).

MIA FRSIC

Under the first initiative, MASB is working with MIA as an observer in FRSIC. The main objective of the committee is to facilitate the implementation of FRS in Malaysia while looking into issues involving accounting standards or provisions of companies’ legislation, where unsatisfactory or conflicting interpretations have developed or seem likely to develop. MASB’s role is to provide FRSIC with the views of the regulatory agencies in terms of issues relating to the application of accounting standards, enforcement and compliance with accounting standards, the view of IASB both public and private and other issues relevant to FRSIC’s agenda.

FRS 139 IC

During the year under review, MASB also set up FRS 139 IC to monitor the Standard’s implementation given the significant impact this Standard would have to the market. This was in response to the decision made during the joint meeting of FRF and MASB on 29 October 2009 to monitor the implementation of FRS 139 Financial Instruments: Recognition and Measurement so as to resolve or mitigate any implementation issues identified in order to assist entities to transition efficiently to FRS 139.

Following the establishment of FRS 139 IC, MASB held various meetings with financial institutions, public listed companies, auditors and investment companies on the FRS 139 implementation issues. The last meeting of the FRS 139 IC was held on 2 June 2010.

For the current year, MASB in January issued a consolidated FRS 139 which included all the amendments issued to FRS 139 and a transitional provision for the financial services industry with regards to collective assessment of impairment requirement. In addition, in March amendments to FRS 132 were issued to resolve inconsistencies between FRS 139 and FRS 132.

CTF

During the year under review, MASB also set up the CTF to look into the convergence policy with IFRS. The CTF and its sub-committee will continue with their quarterly meetings in the current year.

CTF’s objectives are to coordinate the relevant authorities’ efforts in developing guidance for disclosure of transition to IFRS, coordinate efforts of relevant authorities in reviewing progress of companies and their transition to IFRS, communicate MASB policy on convergence to all parties in the financial reporting chain for them to take the necessary actions, review all locally developed technical pronouncements and recommend their applicability to MASB, and any other matters related to convergence.

In line with its stated mandate, CTF has established an action plan that comprehensively charts the way forward to a smooth transition to full convergence with IFRS. The action plan adopts a time frame for the immediate 2010-2012 period and post-2012.

It focuses on the following five key areas. These include efforts to ensure smooth application of IFRS, provides guidance on transition to IFRS to ensure adequate disclosure on adoption of IFRS, actions by the stakeholders and academia to understand and apply IFRS appropriately, proactively, participates in the IFRS standard setting process at an early stage and to equip the various key players in the financial reporting process with in-depth and up-to-date information.

In terms of memberships, the CTF main committee is chaired by the MASB Chairman and comprises representatives from the regulatory bodies, accountancy professions and other professional bodies.

A CTF sub-committee on Accounting was also set up to review all locally developed technical pronouncements. Its members are made up of representatives from accounting firms, commerce and industry, and the academia.

So far, it has issued an exposure draft, ED 70 Technical Release 3 Guidance on Transition to IFRSs. This proposed technical release contains several recommendations whereby entities that are required to apply IFRS in 2012 are encouraged to provide users with appropriate and useful information during the transition phase from MASB Financial Reporting Standards (FRS) to IFRS. It prescribes the disclosure guidelines for preparation of financial statements for the transition to IFRS for the 2010 and 2011 annual reports.

Other areas

We have also participated in other key activities aimed at managing implementation issues, such as with MIA FRSIC and the CTIM-MIA-MICPA Joint Tax Working Group which is reviewing the tax implication of implementation of FRSs. In January this year, this Working Group issued 8 discussion papers and submitted them to the Ministry of Finance for consideration.

Engaging stakeholders

In the past, MASB had been reactive in engaging with the stakeholders. Now, we are going more on the offensive and are organising more face-to-face industry meetings with auditors and certain industrial groups such as financial institutions, plantation companies, property developers and contractors, to make them aware of, and help them prepare for, the changes. We are planning to go on seven roadshows on IFRS for SMEs to further engage the stakeholders this current year.

During the year under review, MASB promoted the use and application of accounting standards by engaging with users, preparers, auditors and the public by holding public forums and dialogues with stakeholders and I am pleased to report that we achieved a high level of engagement with them.

I am also proud to report that the MASB together with the IASB successfully held a roundtable discussion in Kuala Lumpur on IASB’s proposal on Fair Value Measurement. The roundtable discussions were part of our initiative to be proactive and if possible, influence the changes in the upcoming accounting standards. The IASB was represented by two board members, and the Project Manager for the project.

In addition, I have represented MASB in serving as a speaker and a presenter in a number of public events. These included the Forum on Financial Reporting from Islamic Perspective and a forum held by Bursa Malaysia on FRS 139. I was also invited to be part of the panel at the National Accounting Conference on the topic of IFRS Transition 2010-2012: Reporting on Corporate Earnings.

For the current year, we plan to hold more public forums, roadshows on IFRS for SMEs, meetings with auditors and the Association of Banks in Malaysia.

Education

MASB has also been giving talks to educators and students so as to raise their quality and knowledge which we believe is critical to ensuring that future generations of accountants are adequately trained.

Several foreign constituents have visited MASB to better understand our operational process. Last year we have provided briefings and talks to the Cambodian Regulators, the Accounting Standards Board of Japan and Japanese Professors.

Our Islamic Technical Unit is also deeply involved in research concerning Shariah compliant profit-sharing contracts, takaful and sukuk. As there is little awareness of the accounting issues concerning these topics, we plan to issue discussion papers on them to enhance our constituents’ education as well as gather public feedback to gauge the need for further pronouncements on the issues.

Another initiative we have done is to support that Malaysia International Islamic Financial Centre initiative by providing clarity on how to account for Islamic Finance transactions. We issued our Statement of Principles to say we will not be issuing Islamic Accounting Standards but follow IFRS. In addition we chair the AOSSG working group on Islamic Finance to help educate the IASB about Islamic Finance issues.

Engaging Regional and International Standard Setters

At the global level, MASB now adopts an international engagement strategy. In the past, we were perceived as helpful but a small voice in international accounting standard setting. Now, we will be more proactive.

MASB was involved in the establishment of AOSSG and participated in the AOSSG Working Group. Currently, we are participating actively in a number of the AOSSG working groups in preparation for issues to be discussed at the second meeting in September.

The formation of AOSSG is important given the number of countries in this region which are in the process of converging their accounting standards fully with IFRS. It is important that their concerns and issues are conveyed to the IASB in a more formal and holistic way and, at the same time, to provide a forum on how to resolve common issues. The IASB, the issuer of IFRS, welcomes this AOSSG initiative as it provides more focused and relevant feedback from an important region of the world.

With Malaysia as the current Chairman of AOSSG, MASB will make sure that the voice of Asia is being heard by IASB. As an example, we have submitted our proposal to IASB for a review of IAS 41 Agriculture, specifically to exclude bearer biological asset from its scope.

Also, with Malaysia positioning itself as an international Islamic financial hub, AOSSG in November 2009 established a working group on financial reporting relating to Islamic finance. MASB is proud to say that we have been appointed the Chair of the working group, which is made up of six national standard setters. The working group’s objective is to facilitate AOSSG in providing input and feedback to the IASB on the adequacy and appropriateness of proposed and existing IFRS to Islamic financial transactions and events. The output from the working group’s discussions will be documented in a discussion paper which will be presented to AOSSG in Tokyo in September this year.

We also held the Regional Standard-Setters meeting in April 2009 where 11 countries participated and we were involved in presenting technical subjects including agriculture, revenue and a separate session on Islamic-based transactions.

Apart from those international engagements which I mentioned earlier, to build closer professional ties and to learn from each other, MASB will also participate in other international forums such as the World Congress of Accountants, the National Standard-Setters Group meetings as well as key IASB meetings.

Conclusion

2009 had been exciting year for MASB. It has to catch up with existing IASB pronouncements to smoothen the path for adoption of IFRSs and introduced FRS 139 on financial instruments in the current year. I would like to thank all the staff for their dedication, commitment and hard work that have brought us to this point and in particular their help in making the First AOSSG meeting a success.

I would also like to close by expressing my thanks to the FRF members, the regulators, the professional accounting bodies, the accounting firms, the corporate sector, the academia and the Ministry of Finance as well as other relevant Ministries for contributing their time and expertise and for their continuing support.